This bill is designed to address the skyrocketing pension contributions required by county health departments, regional state universities, mental health centers, rape crisis centers and other quasi-governmental agencies.
What's does the bill do?
The bill extends the freeze of the contribution rate for these agencies at 49 percent for one more fiscal year, until July 1, 2020. Also, the bill provides an option for quasis to leave the Kentucky Employee Retirement System (KERS) nonhazardous plan by paying their liability in one lump sum or installments. Agencies would have between April 1, 2020 and May 1, 2020 to stating their intention to stop participating in KERS. Quasis that decide to leave the system will determine if their Tier 1 and Tier 2 employees will be allowed to stay in KERS or if those employees will change to a defined-contribution plan, similar to a 401(k). All Tier 3 employees of quasis opting out of KERS will switch to the 401(k)-style plan.
What was the problem?
Due in part to adjusted actuarial assumptions used to determine the pension contribution rate, the rate for quasi-governmental agencies increased from 49 percent of payroll to 83 percent. The increased rate would have taken effect July 1, 2019. Many of these agencies said they wouldn't be able to pay the higher rate without drastic layoffs and/or cutting important services.
What happens now?
House Bill 1 becomes law retroactively to July 1, 2019; however, legal action against the bill is possible. Some legislators have commented that more discussion is needed, and this issue could return in the next regular legislative session which begins in January 7, 2020.
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